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TMI Blog2015 (6) TMI 272X X X X Extracts X X X X X X X X Extracts X X X X ..... s common order for the sake of convenience. 2. In ITA No. 1277/Ahd/2012 for A.Y. 2005-06, Revenue has filed the appeal on the following grounds: "1. Ld. CIT(A) has erred in law and on facts in deleting the addition on account of suppression of sale price of Rs. 49,12,473/- without appreciating fact that the assessee established syndicate with the network of dedicated transporters and dealers to camouflage part of their undervaluation." 2.1 In I.T.A. No. 1287/Ahd/2012 for A.Y. 2005-06, assessee has filed the appeal on the following grounds: "1. The learned CIT(A) has erred both in law and on the facts of the case in dismissing the appellant's ground of appeal challenging the validity of the notice issued U/s. 148 of the Act as regards re-opening the assessment. On the basis of facts and circumstances of the case, the learned CIT(A) ought to have held that the notice issued U/s. 148 of the Act and the consequential re-assessment proceedings are invalid. The same be held so now. 2. The learned CIT(A) has erred both in law and on the facts of the case in dismissing the appellant's ground of appeal challenging the rejection of books of accounts U/s. 145 of the Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the books of the assessee are not reliable, do not show the correct profits of business and hence are rejected u/s. 145." 3.2 Matter was carried before the First Appellate Authority, wherein rejection of books of account u/s. 145 was upheld by observing as under: "3.3 I have considered the facts of the case, assessment order and the submission of Ld. AR and don't agree with the submission made by the Ld. AR, the statements of Shri Prakashbhai Dahyabhai Patel, Director of the assessee company recorded u/s.14 of the Central Excises Act 1944 before the Superintendent, DGCEI Zonal Unit Ahmedabad on 06/09/2008, 30/06/2009 and 02/07/2009 and he admitted that he received Rs. 15 to 20 per box. He has further accepted that the due to market compulsion and general trade practice, they had been suppressing the MRP and paying less central Excise Duty, considering the above fact assessee has not shown real profit in his books of accounts, therefore, AO has rightly to rejected books of accounts. Secondly, the case laws cited (supra) by the appellant is not at all applicable to the facts and circumstances of the instant case. In view of the above discussion and the facts of the case, I u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly stated that the tile manufacturers were obtaining freight and transport bills at a lower rate and the differential amount payable to the supplier of raw materials and transporters were paid out of the cash so collected from the dealers/distributors. It is therefore very apparent that even the DGCEI has accepted & acknowledged the fact that not only MRP is being reduced for the purpose of alleged excise duty but also complete expenses/costs with reference to the purchase of raw material and other incidental manufacturing expenses have been correspondingly shown at a lesser amount. This only goes to show that it is not a case where the entire expenses have been recorded in the books of accounts and the alleged suppression of sales is not accounted for thereby resulting in the entire alleged suppression of receipts as income. Part of the alleged suppression of receipts have been used for the purpose of making cash payments for the various expenses associated with the manufacturing activities. However, since some of the expenses relatable to the unaccounted receipts are accounted in regular books and some are not, the GP to be adopted for the purpose of computing profits on the un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s carried before the First Appellate Authority, wherein CIT(A) observed that Assessing Officer had adopted @ 40% on suppression of sale in the assessment order. Assessing Officer has himself noted in assessment order vide page no.24 of assessment order is as under: "The DGCEI has made very relevant observation in para No.29.3 page 177 of the show cause notice issued to the assessee. After the detailed enquiry and examination of the various agencies involved in ceramic tiles industries, they have come to the conclusion that assessee established a syndicate with the network of dedicated transporters and dealers to camouflage part of their undervaluation. Investigation further revealed that the dealers were also not declaring various incidental and ancillary expenses as the same were met with from the cash amount collected by the dealers from their buyers over and above the value declared in the sale bills. The tile manufacturers were purchasing raw materials either without bill or at reduced rates. This was done particularly so as to keep manufacturing costs on paper at lower side so as to match the deflated MRP. It has also been categorically stated that the tile manufacturers wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ash received Rs. 2,01,44,670/- and Rs. 80,57,868/- is taxed as unaccounted income earned on account of suppression of MRP." From the above, CIT(A) observed that assessee has resorted to large scale suppression of sale though various modus operandi. This suppression was also accepted by engaged parties. Assessing Officer accepted the contention that the quantum of suppression of sales should be based on ex-factory rate and has accordingly modified the quantum, determined by DGCEI, on the basis of MRP. The stand of assessee has been that it was at best provisional since the issues raised by Directorate General of Central Excise Intelligence (herein after referred as 'DGCEI') was not finally adjudicated. As such, figures adopted by Assessing Officer also be subjected to consequential modification. The DGCEI had observed that raw materials were purchased without bills or at reduced rates and freight and transport bills were obtained at a lower rate. In this background, learned Authorized Representative submitted that addition on account of suppression of sales has origin in investigation conducted by Directorate General of Central Excise Intelligence, Ahmedabad Zonal Unit has revealed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is that proceeding which initiated at the strength of investigation conducted by DGCEI, Ahmedabad are basis for addition in income tax proceeding as well. It was submitted that proceeding with regards to evasion of exercise was pending before concern Tribunal and which will have bearing on the issue at hand. So, in the interest of justice, matter should be restored to CIT(A) with direction to decide the same as per fact and law in light of final outcome in the Excise proceeding as discussed above. Finding force in the contention of assessee, we set aside the order of CIT(A) and restore the matter to him with direction to decide the same as per fact and law including final outcome in Excise case, which was initiated at the strength on investigation by DGCEI, Ahmadabad and has bearing on the issue of additions in income tax proceeding as discussed above. Since we are restoring the matter to CIT(A) with preliminary issue as discussed above, so, we are refraining to comment on merit of issue at hand. 5. As a result, appeal filed by Revenue as well as assessee for are allowed for statistical purpose as indicated above. 6. Similar issues arose in A.Ys. 06-07, 07-08 and 08-09 in case o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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